Im(port)ant business

County, economic development leaders look to resolve differences over future of port authorities

Editor’s note: Readers unfamiliar with the complex concept of port authorities may want to start by reading the "PORT AUTHORITY 101" (found below) about how they operate and why they can be a valuable asset to communities large and small.

The link between Logan County’s primary economic development agents and county commissioners has been stretched thin by an ongoing debate whether the county needs two port authorities.

The two bodies on Friday, however, agreed  that they may be able to come to a resolution through continued discussion.

In a letter dated July 27, the Logan County Commissioners threatened to cut a $50,000 annual financial commitment to the Community Improvement Corporation, which works with the Logan County Chamber of Commerce to promote the county and city to companies considering locating or expanding here.

Chamber and CIC officials, however, argue that the economic development machine may not need taxpayer support in the future if the Bellefontaine Finance and Development Authority, which can generate revenue through leases or fees on major projects, became the accepted agency for port authority-styled financing incentives.

Commissioners believe the BFDA lacks significant government oversight to prevent board members from profiting or moving forward unchecked with projects that are not widely supported. In April of this year, they created the Logan County Port Authority, which they believe addresses the weaknesses of the BFDA model.

That leaves Logan County, a county of 46,000 people, with two port authorities — bodies that were originally created to unite multiple government agencies under a single banner to address issues jointly.

PortAuthorityTable

Structural differences

Although the aim of both local port authorities is the same — encouraging economic development — critical elements of their organizational structures are different.

The BFDA was created by an act of the City Council in late 2015, but it is largely controlled by the CIC and the chamber.

Three of the BFDA’s board members are selected by the mayor, while the fourth is the chair of the CIC board. While the board does not currently receive compensation, the body’s bylaws do permit the board to compensate themselves for services.

Although the Bellefontaine mayor can remove board members with input from City Council, the city government has no legislative authority over the BFDA’s operation.

Commissioners believe this approach is a flaw in the organization’s structure.

The LCPA consists of three members, all appointed by the commissioners, and the April 20 resolution creating the body states that board members are not paid for services, but may file for expenses.

The commissioners have also created a legislative check in that the elected officials must approve the budget submitted by the appointed board members.

By comparison, the Marysville-Union County Port Authority, which was created in 2008, has three members appointed by the city mayor and three by the commissioners with a seventh member who is agreed upon by both bodies. The dual government bodies maintain legislative checks over the port authority’s ability to levy taxes and seize land through eminent domain, but do not approve the budget.

Local history

Discussion about creating a local port authority began in late 2014 and originally involved the possibility of creating a data center owned by a port authority, which would have power to own property and charge rent, much in the same way larger port authorities charge rent to shipping companies in seaports or airline carriers at airports.

Commissioners, however, were skeptical of this idea and focused much of their attention in the July 27 letter on the data center proposal. They said the proposal lacked a business plan to back it up and it appeared it would cost the county more money in data storage costs.

“It was clear to us that the county could not be part of creating a port authority solely for the purpose of generating funds for the chamber without assurances that the data center could pay its debts,” the commissioners wrote in the letter.

Chamber of Commerce CEO and President Paul Benedetti said the data center was pitched as one possible way that a port authority could be used to benefit local interests. 

He also said he approached commissioners with another project that later turned out to be the Honda Data Center — a project that was very interested in port authority financing and which eventually located in Union County. As part of the $53 million project, Honda paid the MUCPA $311,000.

Commissioners, however, deny that they were told that landing the project hinged on whether or not Logan County could provide port authority incentives and said they go to great lengths to support economic development.

Benedetti and CIC President Rick Gildow report they went to city officials to help form the BFDA after failing to be able to convince commissioners to support a port authority.

Commissioners say they were not asked to participate in the port authority until after it was established, but the final product lacked the government oversight they believed was necessary and also presented possible conflicts of interests by having Gildow, who is also a paid part-time employee of the chamber, as a voting member of the board.

Gildow does file an annual disclosure of conflict of interest with the CIC.

Lost revenue

To further complicate the discussions, sales tax is a significant revenue stream for county government, and commissioners said they did not like the idea of giving up the county’s share of sales tax without some way to recoup the losses.

The port authority they created earlier this year collects a fee of 25 percent of a company’s total sales tax savings, which is calculated at the end of the project. This should be well more than the amount the county would lose in revenue by providing sales tax exemption.

The $15 million Midwest Express Inc. project recently approved by the LCPA, for example, is expected to generate a final fee of approximately $140,000.

By contrast, the BFDA’s first project, an agreement with Thomas & Marker Construction Co. to build two $2 million warehouses for NEX Transport at a new industrial park on west Sandusky Avenue, was charged only a small fee to recoup the cost of establishing the BFDA, Benedetti said, noting that it was a test project for the new port authority concept.

Compromise

While both the commissioners and the economic development officials believe their style of port authority has advantages over the other’s, they both said Friday they intend to work together to try to iron out their differences to arrive at the best option for Logan County.

“The Chamber leadership and the Commissioners are making efforts to begin the healing process to get beyond the port authority dispute,” Benedetti wrote in an email. 

“A port authority is a tool in the economic development tool box that the public private partnership can use to attract retain or expand employment opportunities for the health of Logan County’s economy. The world of economic development has become highly competitive and Logan County needs every tool available to compete with other counties not itself.

“We are convinced that all community leaders elected to serve the citizens of this great community will always look to what is best for sustainable, measured growth and prosperity.”

The commissioners also said they would like to resolve the differences. The parties have yet to establish a date for the discussions.

“We have always been committed to finding a resolution,” Commissioner Dustin Wickersham wrote Friday. “We are definitely willing to find a resolution.”


Port Authority 101

When people hear the term port authority, they typically think of busy seaports bustling with maritime traffic.

Possibly an airport with various passenger and freight airline companies operating out of the same hub that also includes retail businesses comes to mind.

Maybe the idea of one of America’s largest such entities — the Port Authority of New York and New Jersey — and its most famous property, One World Trade Center, bubbles to the surface.

All these uses and many more are examples of ways port authority structuring can be used for public projects, according to the American Association of Port Authorities, which has a membership of 130 port authorities throughout North America.

In an online document titled Seaport Governance in the United States and Canada, author Rexford B. Sherman presents a history of port authorities from the first example at the wharves of San Francisco to more modern uses like the ones that are currently developing as economic tools in Ohio communities with no seaports.

A brief history

In 1851, the California legislature required the city of San Francisco to build wharves at the end of all its streets and then authorized the city to collect rent from commercial users to help repay the debt. This, Sherman writes, was the birth of the port authority concept.

Near the turn of the 20th century, in the Pacific Northwest state and municipal governments began responding to a growing concern that railroad companies were developing monopolies over commercial waterfronts. This led to new forms of port authorities being formed that allowed the government to own ports and lease the space to businesses.

The idea spread to the Atlantic in the early 1900s and in 1921, the PANYNJ came into being. In addition to controlling ports, however, the new body began assuming responsibility for major infrastructure projects, such as the tunnels and bridges that link the two states and the LaGuardia and JFK airports, as well as One World Trade Center, which it leases to various tenants.

“While port authority powers vary widely, all share the common purpose of serving the public interest of a state, region or locality,” Sherman writes, adding later in the same section that, “Certain port authorities exist simply to provide bonding authority for port facility financing.”

Why here?

Both of the port authorities created in Logan County recently — the Bellefontaine Finance and Development Authority and the Logan County Port Authority — fall in this latter category.

Their primary purpose is to create economic incentives for companies to locate or expand existing operations in Logan County.

Some of the benefits available through a government port authority include not paying sales tax on materials used in new construction, avoiding prevailing wage requirements, potentially lower interest rates through government bonds and tax benefits associated with leasing property as opposed to owning it.

But the local port authorities, although small, have the same legal ability to own property and lease space in the way the PANYNJ or other large ports rent space to commercial interests in major ports.

Governance

Organizational structures also vary widely, Sherman writes, noting that some port authorities are essentially divisions of government, while some are nearly autonomous private entities.

While the PANYNJ is immense — boasting its own 1,600-person police force — and its activity is broad, its organizational structure is fairly typical of port authority governance.

It was created as a partnership between the two states largely to facilitate interstate transportation. Each governor appoints six members to the board and each state senate must approve the appointments. Any actions taken by the port authority’s governing board can be vetoed by the governor of either state, allowing for a range of legislative checks over the entity.

Locally, the Marysville-Union County Port Authority is organized in a similar fashion with the city mayor and county commissioners each appointing three members and then jointly naming the seventh. The two bodies then have a legislative check over tax levies or imminent domain issues.

“The point is that each U.S. port authority is unique in some respects, markedly so in many instances,” the author of the paper wrote.